Editorial: Getting serious about the deficit

Monday

Jul 19, 2010 at 12:01 AMJul 19, 2010 at 7:16 PM

People can get lost in the big numbers - millions, billions and now trillions - that dominate debates over the federal budget deficit, especially because the numbers are rarely produced without political spin.

People can get lost in the big numbers - millions, billions and now trillions - that dominate debates over the federal budget deficit, especially because the numbers are rarely produced without political spin. But a good graphic, like the one attached to this story, can help clarify the big picture.

That clarity is sorely needed. Voters' concerns about the federal deficit and federal debt are rising, prompting politicians to demand or promise immediate solutions. But politicians who have spent their careers responding to voters' other wishes - like more spending and lower taxes - aren't good at changing their stripes. They are better at using the deficit to argue in support of things they've always supported and in opposition to things they've always opposed.

Politicians also play games with numbers, pretending a dime's worth of savings will cover a dollar's worth of benefits, or confusing short-term measures with long-term implications. Extending unemployment benefits, for instance, which the Senate is expected to take up this week, would add $33 billion to this year's deficit, but that's it. Permanent repeal of the estate tax, which is also on Congress' agenda, would have little immediate impact on the deficit but would add $600 billion to the deficits by 2018.

Consider, then, the deficit building blocks shown on the chart, and how, left unaddressed, the CBO estimates they will generate continuing deficits of over $1 trillion for the forseeable future:

- The TARP bailouts and stimulus bill, much maligned as President Barack Obama's contribution to the deficit, are short-term measures. After 2011, their contribution to the deficit is small.

- The wars in Afghanistan and Iraq are long-term commitments, both in terms of spending and interest on money already spent.

- The Bush-era tax cuts have a greater impact on the deficit as the years go on, which is exactly why Congress and the White House decided in 2001 and 2003 that most of them must expire at the end of this year. Republicans who are now insisting those tax cuts be extended must explain how they can rail against deficits while favoring a proposal estimated to add $3.28 trillion to the deficits between now and 2018.

- The recession has added to the deficit, as recessions always do, by reducing tax revenue while increasing the cost of government safety net programs. Here, the assumptions are especially fluid: If the economy recovers quickly, the deficits shrink; if it founders, deficits grow.

Thus, the Democrats can argue that spending more money on stimulus now will grow the economy and reduce deficits later. Republicans can argue that cutting taxes now will have the same beneficial impact. Both these assumptions should be challenged, if only because they serve as rationalizations for long-held policy preferences.

There are other contributors to the deficit that aren't included on the chart. Obama's health care reform, for one, doesn't show up because the CBO has concluded the bill will actually reduce the deficit by $143 billion over the next 10 years, not add to it. It's one spending program that is paid for, a marked contrast from the Bush years, when, as GOP Sen. Orrin Hatch recently confessed, "it was standard practice not to pay for things."

But estimates can change. The CBO decided in May that health reform will cost $115 billion more to implement than it had previously thought. Moreover, health reform's fiscal viability is based on assumptions that incentives and innovations in the bill will slow the growth of health care costs. But that intention must be backed up by action, and there's little reason for optimism. For years, Congress has shrunk from its own mandates to cut Medicare payments to physicians. The reaction among Republicans to Obama's appointment of Donald Berwick to head the agency overseeing Medicare and Medicaid is particularly discouraging. Their concern, they've said, is that Berwick is an advocate for reining in spending on health care entitlements. If the self-styled fiscal conservatives don't want to save money in the fastest-growing federal programs, where will the discipline come from?

America must get serious about the deficit, both to raise confidence in the economy short-term and to avoid passing a crushing debt to future generations. That means we must not get distracted by big fights over small expenditures. We must not accept symbolic acts of short-term frugality when substantive, long-term commitments are necessary. Mostly, we must demand our leaders work constructively to solve the problem instead of playing the problem for political advantage.